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Employment Taxes


Under the Federal Insurance Contributions Act (FICA), an employer is required to withhold Social Security taxes, including Medicare taxes, from wages paid to an employee during the year and must also match the tax withheld from the employee’s wages. The employee and employer generally each contribute 7.65 percent in FICA taxes, consisting of a 6.2 percent component for Social Security and a 1.45 percent component for Medicare. For 2011, however, the employee’s FICA tax rate is temporarily decreased. The Social Security tax rate applies only to wages paid within a Social Security wage base.


The Federal Unemployment Tax Act (FUTA) imposes a tax on employers who employed one or more persons in covered employment on at least one day in each of 20 weeks during the current or preceding calendar year or who paid wages generally of at least $1500 in a calendar quarter in the current or preceding calendar year. The tax is based on the first $7,000 of certain wages paid during the calendar year to each employee. Generally, the full tax rate is 6 percent, but the employer is allowed a partial credit against this tax based on its state unemployment insurance tax liability.

Employer Returns

An employer subject to FICA taxes must file a quarterly return on Form 941 to report FICA taxes withheld from wages. Small employers with an estimated annual employment tax liability of $1000 or less may report the taxes annually using Form 944 under the Form 944 Program. Employers who must pay FUTA tax on wages generally must file an annual return using Form 940, to report that amount. Form 941 is due on or before the last day of the month following the quarter involved. The Form 944 program allows certain small employers to file an annual Form 944 rather than a quarterly Form 941. Generally, Form 944 is due January 31 of the year following the year for which the return is filed.

Brandywine Tax Resolution has vast experience in the resolution of state and federal employment tax problems. This experience includes successfully representing Taxpayers at audits, appeals conferences and in litigation. Brandywine Tax Resolution also prepares unfiled employment tax returns for its clients.